Economy

Treasury keeps off CBK overdraft in liquid market

cbk

Central Bank of Kenya. FILE PHOTO | NMG

Summary

  • The Treasury has paid off overdraft funds and kept off the emergency loan facility at the Central Bank of Kenya for the second week in a row, signalling muted cash flow pressures amid increased appetite for government debt by banks on the back of depressed economic activity.
  • Latest domestic borrowing statistics show the Treasury did not have overdraft liability in the weeks ending July 24 and July 30, a rare occurrence in recent years, after the emergency loans from the CBK amounted to Sh47.15 billion in the first week of July.

The Treasury has paid off overdraft funds and kept off the emergency loan facility at the Central Bank of Kenya for the second week in a row, signalling muted cash flow pressures amid increased appetite for government debt by banks on the back of depressed economic activity.

Latest domestic borrowing statistics show the Treasury did not have overdraft liability in the weeks ending July 24 and July 30, a rare occurrence in recent years, after the emergency loans from the CBK amounted to Sh47.15 billion in the first week of July.

“Covid pandemic has adversely affected economic activity and the low uptake of credit by private sector has increased availability of loanable funds to the government,” Haron Sirima, the director-general for public debt management at the Treasury, told the Business Daily.

“With increased liquidity and decline in rates, the government sought to front-load borrowing to finance critical development expenditures at lowest cost, but balancing the need to not crowd-out private sector.”

The overdraft facility at the CBK provides a temporary source of cash for the Treasury to cater for emergencies and priority payments when revenue streams such as tax receipts and debt do not flow in at a pace that matches expenditure demands.

Dr Sirima said the retirement of the overdraft points to “improved debt and cash management operations as well as better coordination with monetary operations” by the CBK.